UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. - Quarter Report: 2012 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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For the quarterly period ended March 31, 2012
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _________ to ________
Commission file numbers 000-50081
INVISA, INC.
(Name of registrant as specified in its charter)
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Nevada
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65-1005398
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(State or Other Jurisdiction of Organization)
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(IRS Employer Identification Number)
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1800 2nd Street, Suite 965, Sarasota, Florida 34236
(Address of principal executive offices)
(941) 870-3950
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x
State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date, May 7, 2012: 14,214,398
Transitional Small Business Disclosure Format (check one): YES o NO x
1
Invisa, Inc.
Form 10-Q
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Page
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Part I.
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Financial Information
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3
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7
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8
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8
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Part II.
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Other Information
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9
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9
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9
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9
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9
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9
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9
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10
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Part I. Financial Information
Invisa, Inc.
Condensed Balance Sheets
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December 31,
2011
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March 31,
2012
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(Unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 589 | $ | 4,656 | ||||
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Accounts receivable
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5,038 | 1,216 | ||||||
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Inventories
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13,569 | 12,728 | ||||||
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Prepaids and other assets
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3,707 | 7,690 | ||||||
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Total current assets
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22,903 | 26,290 | ||||||
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Total assets
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$ | 22,903 | $ | 26,290 | ||||
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Liabilities and Stockholders’ Deficit
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Current liabilities:
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Accounts payable, trade
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$ | 99,458 | $ | 106,836 | ||||
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Accrued Interest
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---- | 27,384 | ||||||
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Due to stockholders and officers
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20,260 | 20,260 | ||||||
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Total current liabilities
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119,718 | 154,480 | ||||||
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Long-Term Debt
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750,232 | 798,414 | ||||||
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Total liabilities
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869,950 | 952,894 | ||||||
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Stockholders’ Deficit:
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Convertible Preferred Stock, 5,000,000 shares authorized ($100 par value):
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Series A, 9,715 shares issued and outstanding
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798,500 | 798,500 | ||||||
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Series B, 2,702 shares issued and outstanding
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270,160 | 270,160 | ||||||
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Series C, 16,124 shares issued and outstanding
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1,600,467 | 1,600,467 | ||||||
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Common Stock, 95,000,000 shares authorized, $.001 par value, 13,959,398 and 14,214,398 shares issued and outstanding
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13,959 | 14,214 | ||||||
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Additional paid-in capital
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32,458,972 | 32,492,717 | ||||||
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Accumulated Deficit
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(35,989,105 | ) | (36,102,662 | ) | ||||
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Total stockholders’ deficit
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(847,047 | ) | (926,604 | ) | ||||
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Total liabilities and stockholders’ deficit
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$ | 22,903 | $ | 26,290 | ||||
See notes to condensed financial statements.
Invisa, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31,
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2011
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2012
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Net sales
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$
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8,924
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$
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6,314
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Costs and other expenses:
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Cost of goods sold
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6,166
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3,046
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Selling, general and administrative expenses
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71,043
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89,441
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(Loss) from operations
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(68,285
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)
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(86,173)
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Other income (expense):
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Interest (expense) and other, net
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(17,522
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)
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(27,384)
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(Loss) before income tax
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(85,807
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)
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(113,557)
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Income tax
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—
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---
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Net (Loss)
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$
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(85,807
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)
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$
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(113,557)
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Net Loss per share
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Basic and diluted
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$
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(0.01
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)
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$
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(0.01)
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Weighted average Common Stock Shares Outstanding :
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Basic and diluted
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13,849,398
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14,214,398
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See notes to condensed financial statements.
Invisa, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31,
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2011
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2012
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Net cash (used in) operating activities
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$
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(46,511
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)
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$
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(44,116)
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Net cash (used in) investing activities
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----
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----
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Cash flows from financing activities:
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Proceeds from Long-Term Debt
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44,350
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48,183
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Net cash provided by financing activities
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44,350
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48,183
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Net increase (decrease) in cash
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(2,161)
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4,067
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Cash at beginning of period
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3,605
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589
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Cash at end of period
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$
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1,444
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$
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4,656
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See notes to condensed financial statements.
Invisa, Inc.
Notes to Condensed Financial Statements
March 31, 2012
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and Rule 8.03 of Regulation SX. The December 31, 2011 balance sheet data was derived from audited financial statements, the accompanying financial statements do not include all of the information and notes required by GAAP. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Annual Report on Form 10-K of Invisa, Inc. for the year ended December 31, 2011. When used in these notes, the terms “Company”, “we,” “us” or “our” mean Invisa, Inc. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
Invisa, Inc., (the “Company” or “Invisa”) is an enterprise that incorporates safety system technology and products into automated closure devices, such as parking gates, sliding gates, overhead garage doors and commercial overhead doors. Invisa has also demonstrated production-ready prototypes of security products for the museum and other markets. The Company is currently manufacturing and selling powered closure safety devices.
Note B - Operating Matters and Liquidity
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ending March 31, 2012, the Company has had a net loss of $(113,557). See Note D – Long-Term Debt to the accompanying condensed financial statements for substantial restructuring of the Company’s debt, including extension of the Company’s debt payment dates.
Note C – Due to Stockholders and Officers
Due to Stockholders and Officers at December 31, 2011 and March 31, 2012 is as follows:
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Edmund C. King
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$
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20,260
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Note D - Long-Term Debt
The Company’s credit facilities with its Senior Lender were revised on December 31, 2011 to an aggregate of $753,319 and in January 2012 further revised to $778,319. The Notes under this these facilities bear interest at 10% and have a first security interest in all of the Company’s assets. Additionally, the credit facilities are secured by a security interest in 25,413,333 shares of the Company’s common stock which are held in reserve by the Company. Because the credit facilities are not in default the shares are not treated as issued and outstanding. The Notes are due on March 31, 2014.
In addition, on December 31, 2011, the Company established a new Revolving Line of Credit totaling $200,000 with its Senior Lender to finance operations of the Company. This new line bears interest at 10% per annum and is due on March 31, 2014. The line has terms and provisions similar to the notes described above. The line is also secured by a security interest in 5,333,333 shares in the Company’s common stock. As of March 31, 2012, $179,905 of the $200,000 line is available to the Company.
The total outstanding under the Notes and Line of credit at March 31, 2012, was $798,414 and interest accrued on these debts was $27,384.
Note E – Stockholders’ Deficit
During the quarter ended March 31, 2012, 155,000 shares of Common stock were issued pursuant to grants made in 2011 and recorded in that year. In addition in February 2012, 100,000 shares of Common stock were authorized and issued to an officer as compensation. These shares were valued at their fair value which approximated the trading price of the shares of $25,000.
As of March 31, 2012, no stock options were outstanding, granted or exercised.
During the three months ended March 31, 2012, an officer contributed services with a fair value of $9,000 to the capital of the Company.
Note F - Recent Accounting Pronouncements
The Company does not believe that any recently issued accounting pronouncements will have a material effect on its financial statements.
Note G – Inventory
Inventory is stated at the lower of cost or market. Cost is determined using an averaging method, which approximates the first in – first out method. Inventory consists principally of finished goods and raw materials.
Note H - Earnings (loss) per Common Share
Basic and diluted earnings (loss) per share are computed based on the weighted average number of common stock outstanding during the period. Common stock equivalents are not considered in the calculation of diluted earnings (loss) per share for the periods presented because their effect would not be material or would be anti-dilutive.
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this filing. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements. The cautionary statements made herein should be read as being applicable to all related forward-looking statements in this Quarterly Report on Form 10-Q.
Background of our Company
We manufacture and sell sensors using the Company’s patented InvisaShield™ presence-sensing technology in the safety market. We market our line of safety sensors under the name of SmartGate ® brand safety sensors used in or with parking barrier gates to protect life and property. All of our sales revenues are derived from the sale of our SmartGate safety sensors.
We financed our operations in 2011 and 2012 through revenues derived from the sale of our SmartGate ® brand safety sensors and short-term and long-term debt financing. We are focusing our efforts on increasing our sales of our products and reducing operating costs, where possible. In December 2011 the company’s Senior Lender agreed to extend the maturity date of the Senior Secured Promissory Notes and the related accrued interest until March 31, 2014, and put in place a line of credit which we believe is sufficient to finance our operations through December 31, 2012.
Quarter Ended March 31, 2011 Compared to the Quarter Ended March 31, 2012
Net Sales – During the quarters ended March 31, 2011 and 2012, product sales totaled $8,924 and $6,314, respectively. We had a gross profit of $2,758 for the quarter ended March 31, 2011 and gross profit of $3,268 for the quarter ended March 31, 2012. Gross margin, during the quarters ended March 31, was 31 percent during 2011 and 52 percent during 2012.
Selling, General and Administrative Expenses - During the first quarter of 2011 and 2012 selling, general and administrative expenses totaled $71,043 and $89,441 respectively. The increase was attributed principally to consultant fees.
Interest (Expense) and other, Net - During first quarter of 2011 and 2012 interest (expense) and other totaled ($17,522) and ($27,384), respectively. The interest expense during both 2011 and 2012 relates primarily to financing costs and interest due our Senior Lender under Notes and a line of credit to the Company.
Net Income (Loss) - Net loss during the quarters ended March 31, increased from ($85,807) in 2011 to ($113,557) in 2012. This increase resulted principally from decreased sales, increased selling, general and administrative expenses and increased interest expense.
Plan of Development and Operations
We obtained funding of $44,350 in the first quarter of 2011 and $48,183 in the same period in 2012, which together with our cash from sales supported our operations. We have extended the maturity of our debt to March 31, 2014, and put in place a line of credit which we believe is sufficient to finance our operations through December 31, 2012 (See Note D- Long-Term Debt to the accompanying condensed financial statements) and will explore other business opportunities such as licensing and business combinations as they may arise.
Liquidity and Capital Resources
At March 31, 2012, we had a cash and cash equivalents totaling $4,656.
As of March 31, 2012, the Company has borrowed $798,414 (including $20,095 of our Line of Credit) due and owing its Senior Lender. The financing arrangements are set forth in a series of Notes having similar terms and maturity dates of March 31, 2014, specifically (i) $100,000 issued in 2007, (ii) $100,000 in 2008, (iii) three notes aggregating $328,319 in 2010 and (iv) $250,000 in 2011. In addition, the Company has a line of credit in the amount of $200,000. Each note and the line bears interest at 10 percent per annum and is secured by all of the assets of the Company.
Additionally, the Company has pledged an aggregate of 25,413,333 shares of its common stock as additional security for the notes and the line. These shares are being held in reserve as additional collateral against such notes and line. Upon full repayment of the notes, said shares will be no longer be held in reserve. The shares held in reserve are not deemed outstanding as the notes are not in default.
While we are confident that the current funding and sales revenue available to us will be sufficient to finance our operations through December 31, 2012, it is important to note that additional funding, if needed, may not be available when required or it may not be available on acceptable terms. Should we require additional funding, we may need to reduce or refocus our operations or obtain funds through arrangements that would be less attractive to us or which may require us to relinquish rights to certain or potential markets, either of which could have a material adverse effect on our business, financial condition and results of operations.
NA
The Company maintains “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer, and Board of Directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2012 and concluded that our disclosure controls and procedures were effective as of March 31, 2012.
Changes in Internal Controls over Financial Reporting
During the quarter ended March 31, 2012, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d–15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
None
There have been no material changes from the risk factors as previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2011.
None
None
The agreement with our president John Zappala expired and has not been renewed. As a result Mr. Zappala is no longer an officer of the Company. Mr. King continues to serve as our CEO and CFO.
(a) Exhibits filed herewith, Item Number - Description:
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Item No.
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Description
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31.1
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Chief Operating Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a).
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31.2
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Chief Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a).
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32.1
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Chief Operating Officer Certification Pursuant to 18 U.S.C. Section 1350.
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32.2
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Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Invisa has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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INVISA, INC.
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Date: May 7, 2012
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By:
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/s/ Edmund C. King
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Edmund C. King
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Title: Chief Executive Officer
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Date: May 7, 2012
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By:
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/s/ Edmund C. King
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Edmund C. King
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Title: Chief Financial Officer
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